Does Anyone Want Ukraine’s Donbass?

Fighting between Ukraine and the Russian-backed rebels of Luhansk and Donetsk has quieted in recent weeks, but there is little clarity about the future of the two breakaway regions. Will Ukraine succeed in reintegrating them? Or will Russia attempt to annex them? The situation remains murky, but some meaningful clues exist regarding what might happen next to the war-torn territory, writes independent journalist Luke Johnson.

About 1 million of the 2 to 2.5 million people remaining in the separatist-held regions are pensioners, and Ukraine stopped paying social benefits in areas it does not control in November 2014. Photo: Mikhail Sokolov / TASS

On Sept. 8, an unusual headline appeared on a Ukrainian news website. It said that residents of the rebel-run Donetsk region saw “signs that the war was ending.” Defense minister Stepan Poltorak said that there were just “two to four” exchanges of fire recently, which he said was “the lowest number in 1½ years,” while last week Ukrainian President Petro Poroshenko said there had been a true ceasefire for an entire week. Speculation has grown that the Kremlin has redirected its attention toward fighting Islamic State in Syria and helping to prop up the regime of Bashar Assad, a staunch Russian ally. Could this mean that Moscow is done with supporting the Donbass rebels and wants out?

Perhaps—but some signs point to Russia wanting to keep the rebels in power and under Russian influence. Last week, Russian Investigative Committee head Alexander Bastrykin made a vague but strongly worded statement about Russia possessing “universal jurisdiction” in the Donbass. The Russian Foreign Ministry also reiterated its stance regarding decentralization of the regions, saying that Kiev should negotiate further with the rebels to meet their demands. Then on Sept. 9, a news report described the construction of a Russian military base near the village of Soloti, located about 25 kilometers from the Ukrainian border, near a major railway line in Russia’s Belgorod Region. According to the procurement documents for the base, it is not supposed to be finished until late April 2016—implying that Russia is invested in its military support of the Donbass rebels for at least the medium term.

With so many signals pointing in both directions, the issue of whether Ukraine or Russia wants the Donbass has become murky. The once-prospering industrial region will require years of sustained investment and re-population to recover after the war truly ends, making it an expensive asset to possess. Certain facts on the ground point to Russia remaining the Donbass’s patron for the foreseeable future—but given the delicate balance of political considerations on both sides, the situation remains highly fluid.

Part of the reason Russia is likely to retain de facto control of the Donbass for now is that Ukrainians outside the region are wary of retaking it by military force. A slight majority, 57 percent, say they want to see the conflict resolved peacefully—meaning they do not want to regain control of the region strongly enough to be willing to see more Ukrainian soldiers killed on the front lines. Almost a fifth of Ukrainians, or 19 percent, say they would be willing to recognize the Donetsk and Luhansk People’s Republics as independent states. The country’s leadership has sometimes given the impression that they want to excise the area. Kiev has progressively tightened flows of people and goods into the areas, closing two more checkpoints in mid-August, and Poroshenko allegedly, and famously, told Vladimir Putin to “take the Donbass” during ceasefire negotiations. (Poroshenko called this inaccurate, claiming he had told Putin to “get out of the Donbass.”)

At least formally, Ukraine is moving to fulfill its obligations under the Minsk 2 agreement to decentralize power and to grant autonomy to the eastern regions, suggesting that it would be willing to retake responsibility for them—on its own terms. But those terms have proved controversial even within Ukraine, where nationalists oppose granting too much autonomy to the pro-Russian separatists in the country’s east. On Aug. 31, three Ukrainian national guardsmen were killed and over a hundred others injured during clashes in Kiev between far-right protesters and police. The demonstrators were protesting against constitutional amendments allowing for the decentralization of the regions, including the areas held by the Donbass rebels.

It was the worst violence in the capital since Ukraine’s 2013-14 revolution, underscoring the fact that there is no consensus in Ukraine about what approach should be taken regarding the eastern regions. Both the separatists and the Ukrainian far-right oppose the proposed changes for Donetsk and Luhansk—one radical Ukrainian lawmaker even argued that the law was akin to European powers giving Hitler part of Czechoslovakia. Given this divide and the fact that there does not appear to be the supermajority needed to pass the measure at present, it is not clear if and when the law will come into force. On Sept. 10, Poroshenko said that his government was committed to “reintegrating” the regions into Ukraine, but said he would not sit down at the negotiating table with rebel leaders Alexander Zakharchenko of the DNR and Igor Plotnitsky of the LNR.

Given that Russia is gradually taking on some of the duties of governance in the Donbass—including, presumably, advising the rebel leadership on military and other matters—is it safe to assume that it wants to take over the region eventually? Not necessarily.

Despite its political importance, the Donbass region is far from its days as a linchpin of Soviet prosperity. Depopulated, deindustrialized, and war-torn, the region will require billions of dollars to rebuild, funds that cash-strapped Kiev does not have on hand and that Moscow may not be in a position to provide. Out of a pre-war population of 4.5 million, only about half the residents remain. According to Ukrainian government statistics, industrial production fell by 31.5 percent in the Donetsk Region and 42 percent in the Luhansk Region in 2014, and several major iron, steel, machinery, and chemical enterprises went out of service due to the war. Coal production, a mainstay of the region, fell precipitously, down 57 percent in Donetsk and 81 percent in Luhansk from 2014 to 2015. “Local factories that have been unfortunately destroyed, many of them probably will not be rebuilt,” said Ukrainian Finance Minister Natalie Jaresko in an August interview. Kiev and Moscow have both subsidized the occupied areas partially, but to fully fund effective governance and an economic recovery there would be costly.

In many practical ways, Russia is becoming increasingly active in propping up the regions’ economies and local government finances—indicating that the area is progressively slipping further away from Ukrainian control. While the occupied areas have used both Russian rubles and Ukrainian hryvnia, the ruble has become more universal in recent months, and Kiev announced in November 2014 that it would suspend banking services in the Eastern regions that it does not control, rendering ATMs useless. Residents therefore need to travel to government-controlled regions of Ukraine to withdraw money. This decision, coupled with long queues at border crossings between separatist-controlled and government-controlled areas, and the introduction of a favorable 1:2 exchange rate to the ruble by separatist leaders, led to fewer hryvnia in the territories. (The authorities did recently switch to a floating rate, presumably because it was costing so much money to keep the fixed rate.) As a result, the Donetsk People’s Republic announced in August that 90 percent of transactions were taking place in rubles, while 5-7 percent were in Ukrainian hryvnia.

Along with the growing reliance on the ruble, various informal economic links to Russia have appeared. The Organization for Security and Co-operation in Europe has witnessed “a high number of trucks” of coal being transported across the border to Russia, and the DNR has supposedly established bank accounts in South Ossetia, the pro-Russian breakaway region of Georgia, to facilitate financial links with Russia and beyond. Who pays out pensions, a significant source of hard currency in the economy, is also a significant sign of who is in control. About 1 million of the 2 to 2.5 million people remaining in the separatist-held regions are pensioners, and Ukraine stopped paying social benefits in areas it does not control in November 2014, forcing residents to go to government-controlled areas to collect their pensions. Separatist authorities announced they had made over $30 million worth of pension payments for March in Russian rubles, money that the separatist authorities claimed came from tax collections and not from Russian coffers—although this claim is highly suspect given the depleted state of industry in the region. Curiously, the authorities paid out pensions in U.S. dollars in June.

Russia has given more overt assistance in one area: humanitarian aid. Russia has publicized its deployment of 37 convoys of what it claims is humanitarian aid across the border into the region, and denied Ukrainian accusations that there are weapons shipments among them. The trucks have entered without Kiev’s permission, and international inspectors have rarely had a chance to inspect their contents. (Despite the shipments, the UN said in July that the humanitarian crisis was “continuing to deteriorate” and that 5 million Ukrainians needed assistance.)

Given that Russia is gradually taking on some of the duties of governance in the Donbass—including, presumably, advising the rebel leadership on military and other matters—is it safe to assume that it wants to take over the region eventually? Not necessarily. Political analysts have posited that the ideal scenario for Russia is to keep the status quo, for a variety of reasons. First, this allows the Kremlin to use the breakaway territories as a kind of sore in Ukraine’s side, which it can poke whenever it desires, thereby aggravating and destabilizing its foes in Kiev. Second, any greater commitment to the region would require an enormous infusion of cash, which the Russian government is not exactly swimming in. “The [Kremlin’s] worst nightmare is to annex the Donbass, with its starving miners, dilapidated industry, inflated expectations, and leftist attitudes,” said political scholar Vladimir Pastukhov. “No one in the Kremlin wants that.”

Third, the Donbass does not hold the same strategic value as Crimea did, due to the Black Sea port access the peninsula provides for Russia’s navy, meaning that Russia would not be receiving as much in return for its investment in the region. And fourth, if Russia moved to make the area officially independent or even to annex the territories, it would risk being hit with additional sanctions by the West, which it can ill-afford now with the price of oil hovering around $50 a barrel.

Ukraine, it would seem, has greater motivation for retaking the regions, but it is in the weaker position vis-à-vis Russia: if Putin decides that Russia wants to leave things the way they are for now, it is unlikely that Poroshenko can do much about it without making deadly sacrifices. Re-engaging the rebels militarily could also cause the Ukrainian government to lose the support of the West, since it would be a violation of the Minsk 2 agreement. The Putin regime is known as being largely tactical in its decision-making, making the situation particularly difficult to predict, but it seems that for the time being, no one wants the Donbass badly enough to take it. As a result, it will remain a no man’s land between Russia and Ukraine.

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